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Fiscal policy and business cycle characteristics in a heterogeneous agent macro model

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  • Neveu, Andre R.

Abstract

This paper explores the macroeconomic implications of changing fiscal policy in a Heterogeneous Interacting Agent (“HIA”) model. The key contributions to the existing HIA complex adaptive trivial system (“CATS”) literature include the addition of a progressive income tax structure, an expanded role for redistribution, and a stylized reactive government sector. In certain specifications deficit financed tax cuts are shown to effectively shorten recessions, while deficit financed spending stimulus is able to lengthen recoveries. Alternative specifications provide ambiguous support for generalizing the effectiveness of these policy treatments. Robustness checks support the general findings that increased redistribution towards the unemployed results in higher unemployment rates, greater inequality, and shorter contractions.

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  • Neveu, Andre R., 2013. "Fiscal policy and business cycle characteristics in a heterogeneous agent macro model," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 224-240.
    • Handle: RePEc:eee:jeborg:v:92:y:2013:i:c:p:224-240
    DOI: 10.1016/j.jebo.2013.06.006
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    2. Richiardi, Matteo & Bronka, Patryk & van de Ven, Justin, 2022. "Dynamic simulation of taxes and welfare benefits by database imputation," Centre for Microsimulation and Policy Analysis Working Paper Series CEMPA3/22, Centre for Microsimulation and Policy Analysis at the Institute for Social and Economic Research.
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    More about this item

    Keywords

    Agent-based computational models; Fiscal policy; Business cycles; CATS models;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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